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Why Ruby Tuesday (RT) Stock Is Up in After-Hours Trading

Ruby Tuesday (RT) popped in after-hours trading on Wednesday after the restaurant chain reported third-quarter earnings results after the closing bell. Revenue declined year over year to $295.6 million from $307.4 million. The company said the $11.8 million decline stemmed from a net reduction of 30 company-owned restaurants since the third quarter of 2013, as well as a decrease in same-restaurant sales. Diluted loss per share was 12 cents, compared to diluted earnings per share of 8 cents in the same period one year earlier. Diluted loss per share excluding items was 7 cents, compared to diluted earnings per share of 10 cents in the same period one year earlier. Net loss totaled $7.4 million, compared to net income of $4.7 million in the third quarter of 2013. Net loss excluding items was $4.5 million, compared to net income of $6.3 million in the third quarter of 2013. Same-restaurant sales declined 1.9% overall and 2.2% domestically. Same-restaurant guest counts decreased 1.7% for the quarter. For the fourth quarter, Ruby Tuesday expects same-restaurant sales to be down 1% to up 1%.

NEW YORK (TheStreet) -- Ruby Tuesday (RT) popped in after-hours trading on Wednesday after the restaurant chain reported third-quarter earnings results after the closing bell.

Revenue declined year over year to $295.6 million from $307.4 million. The company said the $11.8 million decline stemmed from a net reduction of 30 company-owned restaurants since the third quarter of 2013, as well as a decrease in same-restaurant sales.

Diluted loss per share was 12 cents, compared to diluted earnings per share of 8 cents in the same period one year earlier. Diluted loss per share excluding items was 7 cents, compared to diluted earnings per share of 10 cents in the same period one year earlier.

Net loss totaled $7.4 million, compared to net income of $4.7 million in the third quarter of 2013. Net loss excluding items was $4.5 million, compared to net income of $6.3 million in the third quarter of 2013.

Separately, TheStreet Ratings team rates RUBY TUESDAY INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate RUBY TUESDAY INC (RT) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

RUBY TUESDAY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, RUBY TUESDAY INC swung to a loss, reporting -$0.38 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 107.9% in earnings (-$0.79 versus -$0.38).

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 128.2% when compared to the same quarter one year ago, falling from -$15.07 million to -$34.38 million.

Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, RUBY TUESDAY INC's return on equity significantly trails that of both the industry average and the S&P 500.

The gross profit margin for RUBY TUESDAY INC is currently extremely low, coming in at 13.19%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -12.44% is significantly below that of the industry average.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 728.57% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.